Another month, and another sign that inflation is still scorching hot.
Today’s Consumer Price Index data showed us that costs are still rising at a rapid pace, even if gas prices are coming down. Strip out food and energy prices, and inflation is near its highest point since the 1980s.
Stocks and crypto took the news as a grim reminder that the inflation crisis could be far from over, and the Federal Reserve may need to keep hiking rates.
Slowing inflation was good news for a bit. But here’s the harsh reality: We need to see inflation slow down significantly before the Fed feels comfortable taking its foot off the brake. And in the pursuit of fighting inflation, we could get a recession. That’s a tough pill to swallow, even if investors are willing to look on the bright side every now and then.
So what does this mean for you? It depends.
If you’re trying to take advantage of short-term opportunities, you may need to lower your expectations. Riskier assets like tech stocks and crypto tend to struggle in high-rate environments, and it’s looking more likely that higher rates are here to stay. Plus, it’s taken the S&P 500 an average of two years to recover from every bear market since 1950. Market recoveries are rarely easy.
Still, if you have time on your side, it may be worth taking advantage of lower stock and crypto prices. Just remember that inflation is still an issue and the global economy is in a precarious position. Technology and innovation are still pushing society forward, but this is a tough operating environment, and some companies and protocols may not survive. You may need to strike a balance between risk and safety.
For now, try to assess what each headline means for your own portfolio, and remember that the most painful environments have historically been the best times to put money to work.
*Data sourced through Bloomberg. Can be made available upon request.